As of 31 December 2011, Wong’s King Kong International (Holdings) (0532) recorded a profit attributable to shareholders of HK$75.46 million. Notwithstanding the overall turnover merely rose 1% year-on-year to HK$5.238 billion, the value of sales reached HK$3 billion, setting a record in the history of the group and representing a significant breakthrough 23 years after the group has gone public. Senta Wong, chairman and chief executive officer of Wong’s King Kong, told this website’s reporters the group strives for boosting value of sales in a bid to offset the linear appreciation of the Chinese yuan in recent years so that it can keep its earnings at an expected level and the pace of turnover growth under control.
After many years of business development, the two core parts of Wong’s Kong King ,‘Wong’s Kong King Technology’ and ‘Wong’s Kong King Distribution’, and can be easily identified. The former provides OEM (Original Equipment Manufacturing) products including drives with variable frequency and high efficiency, battery chargers for automobiles, bluetooth handsets and charging stands. The latter distributes equipment like placement machines of the highest efficiency, FPC punching machines, automatic exposure machines and exposure lamps. The OEM unit fared better than the distribution unit in terms of business performance. In 2011, turnover of the group’s OEM division registered a turnover of HK$3.044 billion, representing a 13% jump year-on-year. This division also booked a profit of HK$52 million with the profit up nearly 16% on a yearly basis.
It is understood that 2012 is a tough year for industrial manufacturers. Wong hopes both the domestic and external economy will paint a much brighter picture in 2013 after experiencing a downturn. He sincerely wishes distribution and trading business can gather momentum and perform excellently again at that time. Wong’s Kong King has secured enough orders in 2012 for its OEM products partly because quite a number of manufacturers relocated to China, where the operating environment is more stable, after the 311 earthquake in Japan and Thailand’s floods. The production orders will generate a considerable and a continued flow of income to the group, Wong noted. ‘Wong’s Kong King Technology’ will unmistakably be the major profit driver for the group in the short term. Besides this OEM unit, Taiwan Kong King, a 67% owned subsidiary of the group, also takes up the role of manufacturing high-end electronic products. The unaudited consolidated after-tax surplus of Taiwan Kong King for the first quarter of 2012 soared around 120% year-on-year to NTD38 million. As such, management of the group put a lot of hopes on this subsidiary, which may have the ability to contribute more to the group when the growth of distribution and trading business stalls.
Local investors generally incline to invest in blue chips, finance stocks and property developers stocks, Wong pointed out. He said sectors not belonging to the mainstream, like the industrial sector, have not been paid enough attention they deserve and as a result for a long time prices of stocks from non-mainstream sectors have failed to reflect the real values of the stocks. The group’s management made two attempts to privatize Wong’s King Kong before but both of its privatization plans, rolled out in August 2006 and April 2007 respectively, were rejected by small shareholders. A ‘fantastic journey’ of traveling to the island of privatization from the stock exchange thus began. A majority of substantial shareholders of the group tends to prefer privatizing Wong’s Kong King at the later phase of a stock market downturn due to a number of reasons. First, they believe the listed company has adequate capital at hand and needs not raise funds from the public anymore. Second, the stock price is at a great discount on the company’s asset value. Third, stock price fails to show the actual corporate value despite the company’s operations are running smoothly.
Wong deems privatization can bring four major advantages to the group. First, the group can, by one move, save the enormous listing cost. Second, pressure on the group’s management can be eased as they have to explain the group’s results to shareholders before privatization. Fourth, the group has ample internal resources and will not have to raise funds from the market by any way in the foreseeable future. He did not deny going public has created added value to the group’s brand name by making the group look more credible. Nevertheless, he believes the group has already earned a reputation among customers and suppliers and therefore whether the group retains its listed status has nothing to do with its reputation now. Market value of Wong’s King Kong currently stands at around HK$520 million with the average price-to-earnings ratio kept at 6-10 times. The group’s stock is undervalued, Wong noted. Price-to-book ratio of the group is 0.38 times, implying the book value is higher than market price. Theoretically, investment value of Wong’s King Kong is not smaller than that of the group’s peers. Furthermore, the group has always been keeping the idea of privatization alive and it is waiting for investors to discover the treasures underlying its stock. So, why not take a ride with Wong’s Kong King’s management to continue with the ‘fantastic journey’ ?